TaxTMI 
TaxTMI 
2019 (4) TMI 1517
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....s I.T. enabled back office services to its AEs and in this process it extracts the required data from the financial statements, notes to financial statements, audit report etc., and collating in the form of ratios, standardized graphs etc., and also prepares business descriptions, biographies of key executives and tracks key developments in the companies on a regular basis. Therefore, he treated the assessee as a Contract I.T. Enabled Service Provider, operating in a low risk or almost risk mitigated environment. 3. From the 3CEB report/T.P. document, the AO observed that the international transaction was for a sum of Rs. 372,38,88,703 and that the assessee's margin was 15.38% and that the reimbursement of expenses to the AE was to the tune of Rs. 31,64,046. After going through the TP document, the TPO was of the opinion that the method of search adopted by the assessee suffers from defects which resulted in selection of inappropriate comparables and rejection of comparable companies. Therefore, he rejected the TP document of the assessee and conducted an independent analysis by aggregating both the transactions under the TNMM. He observed that the assessee has selected 10 compa....
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....9;ALP') of the impugned transaction to hold that the same is not at arm's length. 3. The learned AO/TPO/DRP have erred in: a. Not accepting the use of multiple year data, as adopted by the appellant in transfer pricing (TP') documentation; and b. Determining the arm's length margins I prices using data pertaining only to Financial Year ('FY') 2012-13 which was not available to the appellant at the time of complying with the Indian TP documentation requirements. 4. The learned AO/TPO/DRP have erred, in rejecting certain comparable companies selected by the appellant by applying inappropriate comparability criteria such as : a. Different accounting year; and b. Employee cost less than 25 percent of total cost 5. The learned AO/TPO/DRP have erred in passing an order which has computational errors in the margin of the comparable companies used in determination of arm's length margin for the impugned transaction. 6. The learned AO/TPO/DRP has erred, in law and on facts and circumstances of the case, by wrongly rejecting certain companies from and adding certain companies to the final set ....
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....panies are excluded, the assessee's margin would be within the +_3% of the assessee's margin. All other grounds are therefore, treated as not pressed. 5. As regards the comparability of Capgemeni Business Services (India) Ltd to the assessee, the learned Counsel for the assessee submitted that the said company was functionally different from the assessee. He submitted that as per the Annual Report of the company, it is engaged in providing diversified high end services in the nature of engineering services, IT Enabled share services, supply chain, procurement, technical publication, operational control assessments for compliance with SOX Act, IT Risk assessment, assurance and risk management. Therefore, according to the assessee, it is a company which is providing KPO services and therefore, cannot be treated as comparable to the assessee. Further, it is submitted that Capgemeni Business Services (India) Ltd is a well known brand, which is used by the said company without any payment of royalty and therefore, the presence of intangible is a factor which has to be considered for excluding this company from the final list of comparables. He referred to the relevant observations of....
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....iness Experience, and draws on Hightshore, its worldwide delivery model. We offer an array of integrated services that combine top-ofthe- range technology with deep sector expertise and a strong command of our four key businesses. Q. Find Services: Application Services - Infrastructure Services Services Business Services - Insights & Data _ Cloud Choice - Technology and Engg. Services Consulting Services - Mobile Solutions Cybersecurity - Ready2Series Digital Services - Secure Your Assets The aforesaid activities cannot be considered comparable to the assessee which is engaged in providing low end IT enabled services and is a risk mitigated entity. Further, a news article in Business Wire India, dated 25 October 2012, categorically mentions that Capgemini provides a wide variety of services such as Finance & Accounting, Management Assurance, Engineering Services, Content Management, Research & Advisory, Supply Chain Management, Procurement Services and Human Resources outsourcing etc. However quite many of these services such as engineering services, research and advisory are high-end KPO services which cannot ....